Saturday, March 14, 2009

Harvest Swap Meet

If we must stop aggregate growth because it is uneconomic, then how do we deal with poverty in the SSE? The simple answer is by redistribution — by limits to the range of permissible inequality, by a minimum income and a maximum income. What is the proper range of inequality — one that rewards real differences and contributions rather than just multiplying privilege? Plato thought it was a factor of four. Universities, civil services and the military seem to manage with a factor of ten to twenty. In the US corporate sector it is over 500. As a first step could we not try to lower the overall range to a factor of, say, one hundred? Remember, we are no longer trying to provide massive incentives to stimulate (uneconomic) growth! Also, since we are not trying to stimulate aggregate growth, we no longer need to spend billions on advertising. Instead of treating advertising as a tax-deductible cost of production we should tax it heavily as a public nuisance. If economists really believe that the consumer is sovereign then she should be obeyed rather than manipulated, cajoled, badgered, and lied to. Herman Daly, A Steady-State Economy

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